Short-Term Financial Goals Derail Retirement

Long-term financial goals are losing out to short-term
financial pressures, Natixis Global Asset Management found in its 2015
Retirement Plan Participant Study. Sixty percent of workers are saving less
than 7.5% for retirement, and 40% are contributing less than 5%.

Thirty-seven percent have borrowed from their retirement accounts, 38% needed
emergency funds for a financial hardship, and 19% used their retirement savings
to buy a home. Of those who have changed jobs, 43% have taken a lump-sum
distribution rather than keeping the assets in the company plan or rolling it over
to another qualified plan. In addition, nearly one-third (30%) have taken an
early withdrawal from their retirement plan.

Respondents said they will need an average of $805,000 to fund their retirement
and expect to live another 23 years after retiring. However, they have saved an
average of $83,000 in their retirement plan and $95,000 overall.

Boomers say they will need $946,000 to fund their retirement
but have only saved an average of $189,200. Generation X thinks they will need
$741,000 to fund their retirement but only have $74,100 saved. They are also
the most likely to opt out of their workplace retirement plan because of debt,
Natixis said.

Generation Y expects they will need $769,295 to fund their
retirement but only have $23,079 in their retirement account. However, they
started saving at age 23, compared to age 33 among Boomers and 30 among
Generation X.

NEXT: Short-term
pressures

“We’re seeing a conflict between investors’ long-term goals
and the pressure they feel to address their immediate financial needs,” says
John Hailer, chief executive officer of Natixis in the Americas and Asia. “For
many, the short-term pressure wins out and they make minimal contributions, or
opt out of their retirement plan altogether. And many borrow against their
accounts, eroding the assets they’ve worked hard to accumulate.”

Among those who have opted out of their retirement plan, 51%
say they need their money today. Fifty percent said they opted out because
their company doesn’t provide a match or the match is too small. Just over
one-third (34%) say they have too much personal debt to be able to save for
retirement, and 23% say they need to pay off student loans.

Those who are participating in a plan were asked why. Sixty-eight percent said
they want to achieve financial security, 52% said they do not want to work for
the rest of their lives, 50% said they wanted to be able to provide for
themselves, 44% did not want to end up being old and poor, and 38% did not want
to be a burden on their family.

Natixis surveyed 1,000 investors, 750 of whom were active plan participants and
250 of whom were non-participants. The full survey can be downloaded here.